Under the Fair Trading Act 1986, which situation would most likely give a buyer a claim against the listing agent?
Correct Answer
D) A building report reveals known issues the agent failed to disclose
Hiding a known defect can be misleading conduct in trade under ss 9 and 14 of the Fair Trading Act 1986, and a buyer who suffers loss can seek orders under s 43. The buyer is not the listing agent's client, so the Consumer Guarantees Act is the wrong route. Market falls, rate rises and changes of mind involve no misleading conduct by the agent.
Why This Is the Correct Answer
Hiding a known defect can be misleading conduct in trade under ss 9 and 14 of the Fair Trading Act, and a buyer who suffers loss can seek orders under s 43. The buyer is not the agent's client, so the Act that protects customers from misleading agents is the Fair Trading Act, not the Consumer Guarantees Act.
Why the Other Options Are Wrong
Option A: The property's market value falls in the year after the buyer settles
A fall in market value after settlement is a market risk, not conduct by the agent, so there is nothing misleading to found a claim on.
Option B: Mortgage interest rates rise sharply between signing and settlement day
Interest rate movements are outside the agent's control and involve no representation by the agent about the property.
Option C: The buyer later decides the location no longer suits the family
Buyer's remorse about location involves no misleading conduct by the agent, so the Act gives no remedy for a change of mind.
Deep Analysis of This Compliance Question
The question separates loss caused by the agent's conduct from loss caused by the market or the buyer's own choices. A claim needs misleading conduct: a statement, a half-truth, or silence where the circumstances called for disclosure. An agent who knows of building issues and says nothing creates a false impression, and rule 10.7 of the Client Care Rules makes disclosure of known defects compulsory. Falling values, rising rates and second thoughts involve no conduct by the agent at all.
Background Knowledge for Compliance
Fair Trading Act 1986: s 9 prohibits misleading or deceptive conduct in trade; s 14 prohibits false representations and misleading conduct about land; s 43 lets a court make orders, including compensation. Client Care Rules 2012, rule 10.7: a licensee must disclose known defects to customers.
Memory Technique
Ask what the agent did or hid. A known defect kept quiet is conduct; a market fall, a rate rise or a change of heart is not.
Strike out every option where the agent did nothing wrong, and the answer is the one where the agent misled.
Exam Tip for Compliance
A buyer's remedy against a listing agent comes from the Fair Trading Act and needs misleading conduct by the agent. External events never qualify.
Real World Application in Compliance
An agent is told by the vendor's builder that the deck is rotten but describes the home as 'well maintained' and says nothing more. The buyer's post-settlement building report finds the rot. The buyer can bring a Fair Trading Act claim and complain to the Real Estate Authority.
Common Mistakes to Avoid on Compliance Questions
- •Treating the buyer as the agent's Consumer Guarantees Act consumer
- •Thinking a market fall is the agent's responsibility
- •Believing silence can never be misleading
Related Topics & Key Terms
Key Terms:
More Compliance Questions
A real estate advertisement states 'Best value in the area' without any supporting evidence. Under the Fair Trading Act, this statement is:
Under the Fair Trading Act 1986, which statement about advertising a property for sale is correct?
A client provides a bank cheque for $30,000 as a deposit and mentions recently selling cryptocurrency to fund the purchase. Under AML/CFT requirements, what is the appropriate next step?
An agent holds $180,000 in trust across four transactions. One agreement is validly cancelled because the purchaser's finance condition was not met, and both parties' lawyers confirm the $60,000 deposit is to be refunded to the purchaser. What is the correct trust account procedure?
Under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, what is the minimum threshold for conducting customer due diligence when establishing a business relationship in real estate transactions?
- → An international client buying a $2.8 million commercial property provides a copy of their overseas passport but refuses any further identity checks or information, claiming diplomatic immunity. How should the agent proceed under AML/CFT requirements?
- → Which statement best describes the trust account requirements under the Real Estate Agents Act 2008?
- → An agency's trust account reconciliation reveals that interest earned on client deposits has been retained by the agency rather than distributed to clients. This practice is:
- → According to trust account regulations, how long must real estate agencies retain records of trust account transactions?
- → What is the primary purpose of the Consumer Guarantees Act 1993 in relation to real estate services?
- → Under the Consumer Guarantees Act 1993, if a real estate agent fails to exercise reasonable care and skill when marketing a property, what remedy might be available to the client?
- → A real estate agency's trust account shows a shortage of $5,000 during a routine audit. What is the most serious disciplinary order available under the Real Estate Agents Act 2008?
- → A real estate agent advertises a property as having a 'new roof' when they know it was repaired but not replaced. A buyer purchases based on this information and later discovers the truth. Which Acts could potentially apply to this situation?
- → Which statement best describes the primary purpose of trust accounts in real estate transactions?
- → A property advertisement states 'Guaranteed rental return of 8% per annum', although no one has contracted to pay that return. Under the Fair Trading Act 1986, this statement is:
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